Deutsche Bank Fined $9.8 Million by BaFin for Control Lapses
Germany’s finance watchdog fined Deutsche Bank AG 8.66 million euros ($9.8 million) over its handling of submissions for Euribor, a reference rate at the heart of a scandal that rocked the industry.
The lender temporarily didn’t have effective systems and controls for contributions to the benchmark, BaFin, said in a statement. While BaFin said Deutsche Bank has a right to appeal, the company said it accepts the fine to create “legal certainty.”
More than a decade after the financial crisis revealed rampant misconduct and deficient controls, banks are still working through remediation measures and regulatory investigations. While comparatively small, the BaFin fine suggests that Deutsche Bank hasn’t fully delivered on pledges it made after facing the industry’s highest penalties in the Libor benchmark-rigging scandal.
“It remains a top priority for us to identify and address potential weaknesses in our control processes,” Deutsche Bank said in an emailed statement.
Germany’s largest lender faced multiple legal and regulatory headaches in recent years, which have threatened to overshadow the progress it made toward restoring sustainable profitability. The U.S. Justice Department told Deutsche Bank it might have violated a criminal settlement by failing to inform prosecutors about an internal complaint tied to the lender’s asset-management arm, a person familiar with the matter said this month.
Euribor is an acronym for the Euro Interbank Offered Rate. It’s derived from the average interest rate at which banks borrow from one another, similar to the better-known London Interbank Offered Rate.
Global banks alongside Deutsche Bank, including UBS Group AG and JPMorgan Chase & Co., have been slapped with billions of dollars of fines for trying to rig the rates, which were used to price everything from student loans to complex derivatives. That tainted the rates and they are being phased out.
Deutsche Bank agreed in 2015 to pay $2.5 billion in fines to U.S. and U.K. regulators for attempts to manipulate the benchmark interest rates and said at the time that it was addressing related deficiencies.
Deutsche Bank said in relation to the BaFin’s findings that it has already implemented “initial measures” to improve controls in coordination with its supervisors. The bank “has no indication that the fined issue led to incorrect submissions to the benchmark administrator,” it said.
On the bank’s domestic German market, BaFin is tightening oversight to repair its image. The watchdog failed to detect the fraud at Wirecard AG, which collapsed in 2020 after revealing that 1.9 billion euros on its accounts was missing and likely never existed. After a series of reforms, BaFin has been hiring more financial professionals and forged a task force to carry out forensic probes to detect misconduct.
The maximum penalty for violations of European rules governing benchmarks is 10% of a company’s revenue, BaFin said.
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